Apple’s Patently Absurd Smartphone Crusade

Look out across today’s ultra-competitive smartphone market and you’ll see something resembling the religious wars of the Middle Ages. This is no quaint summer-weekend reenactment. The weapons being brandished are devilishly constructed patents; the rules of engagement the arcane procedures of federal courts. And the havoc being wreaked — in higher prices, banned devices, and stifled innovation — is laying waste to the industry landscape.

Android’s release, for Apple’s late founder and CEO Steve Jobs, was the ultimate heresy. “I will spend my last dying breath if I need to,” Jobs is quoted as saying in a series of jeremiads, “and I will spend every penny of Apple’s $40bn in the bank, to right this wrong. I’m going to destroy Android, because it’s a stolen product. I’m willing to go thermonuclear war on this.”

And so Apple has. Between 2006 and 2012, the company was involved, sometimes as plaintiff and sometimes as defendant, in nearly 150 patent lawsuits around the world over various features of its iPhone — including hardware, software, and product design.

Like the religious wars of old, a complex web of alliances, side agreements, and mutual defense pacts have conspired to draw the entire industry into open warfare. Sony is suing LG. Nokia is suing HTC. Motorola (owned by Google since 2011) is suing and being sued by everyone.

While many cases have ended with settlements and elaborate cross-licensing deals, juries in other cases have awarded billions of dollars in damages. Some devices have been banned from importation. And the costs — if only the hundreds of millions being spent on the litigation itself — are surely being passed along to consumers.

The patents involved cover everything from the most basic design elements (a rectangle with rounded corners) to standard elements of the smartphone interface (swipe to unlock). In ongoing litigation between Apple and Samsung, one of many proxy wars over Android, Apple is asserting both of those, as well as patents that include automatic word correction and the “quick link” feature that allows a user clicking on a phone number to be taken directly to the dialing app.

In the most recent episode of this particular campaign, Apple not only claimed that Samsung had infringed on these inventions in Galaxy and other products, but argued incredibly that these features accounted for $30-$40 of the value of each device. The company demanded over $2 billion in damages. (A jury last month awarded a little over $100 million; a verdict that will be appealed by both sides.)

Boiled down to their essence, these and dozens of other pending patent lawsuits raise a fundamental question of particular relevance in rapidly evolving industries: when should new products be left to succeed or fail on their own merits—to trial by battle in the marketplace, if you will–and when should they be given a powerful legal advantage to offset the cost and risk borne by their inventors? What kind of inventions, in other words, deserve the singular protection of patent law, which grants the claimant monopoly control over an invention for as many as 20 years?

In the U.S., the answer begins with the text of the Patent Act, which only extends legal protections to inventions that are, among other limits, “new and useful,” previously unknown to the public, and which are not “obvious” in light of existing inventions.

That may sound like a simple test. But of course every word in the Act is subject to interpretation and construction—first by the Patent and Trademark Office (PTO), and later, if infringement is claimed, by the courts.

Here’s where the problem has become especially acute for information technology inventions such as smartphones and tablets. With minimal expertise in computers, software, and business methods, patent examiners who are under increasing pressure to process an enormous backlog of applications have developed a novel and unfortunate form of outsourcing. They approve nearly every application and leave it to the courts to determine which inventions actually meet the requirements.

While this has helped eased the burden at the PTO, it has put an unconscionable strain on the courts. And unlike economically efficient outsourcing, the PTO’s workload is now lodged in institutions that are far less competent to manage them. Overall, the cost of the patent system hasn’t simply shifted; it’s been multiplied. Some scholarly studies suggest the costs of the patent system now outweigh its benefits to the tune of as much as a trillion dollars over the last 25 years — and the gap is growing.

Worse, the current system’s grotesque inefficiency has opened the door for the full suite of abusive and counterproductive practices on gory display in the smartphone crusades. Had the patents at issue been given a thorough examination in the first place, many would no doubt have been rejected. That would have spared us the hyperbole and hypocrisy that characterizes every demand letter, court filing, and appellate brief by plaintiff and defendant alike.

One glimmer of hope, at least for a truce, was recently snuffed out by the D.C.-based Court of Appeals for the Federal Circuit, which has exclusive jurisdiction over patent appeals. Last month, the court reversed an eminently sensible 2012 ruling by federal appeals judge Richard A. Posner, who sat as a trial judge in one branch of the internecine battle, this one pitting Apple against Motorola. (Full disclosure: Twenty years ago, I spent a year as Posner’s law clerk, a job I frankly wish I still had.)

Reviewing the claims and counter-claims between the squabbling tech giants, Posner declared in Solomonic fashion that neither side had earned its day in court. Dismissing some assertions by both companies as “silly” and “ridiculous,” Posner concluded in a blog posted soon after that the U.S. patent system had become “dysfunctional.”

But the Federal Circuit tossed out Posner’s decision a few weeks ago, holding that his common-sense interpretation of both the law and the patent applications (many still substantively untested) had failed to follow the higher court’s largely incomprehensible precedents. So now the parties will be forced to oil up the machinery of legal warfare once more, spending more millions on a case that should never have been brought.

If not through the firm hand of intelligent judges, how else will the patent crusade be resolved before one of the fast-growing and most innovative markets in modern history succumbs to mutually-assured destruction?

There’s a slim chance that either Congress or the U.S. Supreme Court will provide some relief. A modest patent reform bill, aimed mostly at reining in litigation from patent holders who don’t actually make anything (so-called “patent trolls”), has seen some movement on Capitol Hill this year, and may get past the partisan gridlock.

The Supreme Court has also taken steps to curb the Federal Circuit’s expansive view of patentability, reversing the court repeatedly although rarely providing explicit guidance on an interpretive framework that jibes more closely with both the law and common sense. This term, the Court will hear a record six patent cases, which could restrict the explosive growth of newly-recognized patent rights for software, the preferred weapon of choice in today’s patent wars.

We need more. The religious wars of the Middle Ages lasted over a hundred years and engulfed Europe. On the sped-up clock of technological innovation, even a decade of smartphone patent crusades could prove devastating. To put a definitive end to the conflagration, we might need something like a divine intervention.

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